Fed Hints at Smaller Rate Cut as Inflation Persists

• Market expectations for a November Fed rate cut increased to 83.7% from 67.9%.
• Key economic data in the form of CPI and PPI will shape market sentiment this week.
• Crypto markets face selling pressures despite optimism in equities.

At the Federal Reserve meeting on October 9, 2024, officials expressed a cautious stance on inflation, suggesting that the central bank may not be confident in its ability to combat rising prices. This has led investors to anticipate a smaller interest rate cut of 25 bps in November, with the probability increasing from last week’s 67.9% to 83.7%.

The latest Fed minutes show a less optimistic outlook on inflation as the central bank’s fight against inflation continues. The strong payroll data from last Friday also fueled speculation of a rate cut. The probability of a cut has increased significantly, and is now over 80%.

Read also : Fed Rate Cut: Dividend ETFs and Crypto See Massive Inflows

Having said that, the Fed’s recent interest rate cut sparked a rally in both the stock and crypto markets. U.S. dividend ETFs recorded a surge in inflows, attracting $3.05 billion in September. At the same time, Bitcoin’s gained 15% alongside the broader crypto market upswing. Bitcoin rallied from $57,627 in just 24 hours before the Fed announcement, to reach $66,508 before September’s end. 

Now, all eyes are on tonight’s CPI and tomorrow’s PPI reports, which are crucial indicators for the state of inflation. These data reports, along with major bank earnings from JPMorgan and Wells Fargo, will help us understand the strength of the US economy as inflation cools down.

Crypto Traders Hold Onto “Uptober” Hope Despite Selling Pressure

While the S&P 500 surged last night, reaching a new peak, the cryptocurrency market has not followed suit. Selling pressures in crypto intensified, exacerbated by the continued dumping of Silk Road Bitcoin and PlusToken Ethereum. Despite this, some traders remain hopeful for an “uptober” rally, provided that Bitcoin stays above the critical $60,000 support level.

Read also : Interest Rate Cut vs. Inflation: The Fed’s Dilemma and Crypto’s Future

Because the market is increasingly expecting rate cuts, investors are thinking about locking in yields at the current low levels and getting ready for a potential year-end rally.

With CPI and PPI data underway and market expectations for a rate cut growing, the next few days will be crucial for both traditional and crypto markets. Investors should brace for volatility and prepare for opportunities ahead.